Spanish stocks rally; banks lift Europe

LONDON (MarketWatch) — Spanish stocks rallied and bond yields dropped on Thursday after reports the country may look to speed up emergency financial aid for its banking sector, while other European markets inched higher in a lightly-traded session.

The IBEX 35 index (IBEX) surged 4.1% to 7,417.30, while the yield on the 10-year Spanish government bond (10YR_ESP) fell 0.13 percentage point to 6.51%, according to electronic trading platform Tradeweb. Yields fall as bond prices rise.

Spain is ready to request emergency financial aid under the terms of previously agreed 100 billion euro ($123 billion) bailout of its financial system, Bloomberg reported, citing a person familiar with the matter. European Commission spokesman Olivier Bailly, however, told reporters in Brussels that Spain hasn't made a formal request to tap into the prepared bailout package. See: No request by Spain to tap emergency bank aid: EU

The Stoxx Europe 600 index (SXXP) closed 0.3% higher at 271.22, after seesawing between small gains and losses for most of the day.

“Volumes have been really weak. There’s nothing to drive the market at the moment, which is why investors are sitting on their hands,” said Richard Perry, chief strategist at Central Markets.

“It’s the middle of August, which is dull season, but the issues for investors this year are that there are all these big events in September and they don’t want to take a position before that,” he added. “The fear is that if central banks do press the bottom [for monetary easing], you don’t want to miss out on the upswing after that. But you don’t want to be caught short if the central banks disappoint again.”

Miners provide support

Among sectors moving the pan-European index, mining firms moved higher as Chinese Premier Wen Jiabao Wednesday said downward pressure remained on the economy, but that he sees “growing room for monetary policy action.”

Miners are sensitive to news coming out of China, as the country is a major user of natural resources.

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